Big investors demand more disclosure of environmental risks

Amazon, Facebook, Tesla and Berkshire Hathaway are not communicating climate change data to their shareholders, according to a coalition of prominent investors, which demands that 1,320 companies make clearer disclosures about environmental risks.

Fears that climate change could cause catastrophic environmental damage are fueling demands from institutional investors and regulators for companies to step up efforts to achieve the goal of a net zero carbon economy.

Ahead of the Cop26 climate conference In Glasgow scheduled for November, 168 asset managers and financial institutions from 28 countries, which together represent more than $ 17 billion in combined assets, have signed up to support the Carbon Disclosure Project’s campaign to ensure that data on climate change, deforestation and water use are correctly reported by companies.

According to the CDP, more than 4,700 megatonnes (Mt) of carbon dioxide emissions are produced by the 1,320 companies targeted, more than the whole of the EU.

Emily Kreps, global director of capital markets at CDP, said the tide was turning against companies that failed to respond to investor demands for better environmental risk disclosure.

“This year’s campaign against non-disclosure has reached record levels of support with a 56% increase in investor participation. Investors need consistent, comparable and comprehensive data to help them achieve their own net zero ambitions, ”Kreps said.

US regulators are engaged in a heated debate over whether to impose formal disclosure requirements of environmental, social and governance measures on US companies.

Amazon and Facebook signed a letter this month to the Securities and Exchange Commission, saying it supported “a regular and consistent report on climate-related issues,” while urging the US regulator to allow ESG data to be released. published separately of the main financial reports of the company to avoid possible legal problems.

“Mandatory ESG disclosure is an essential planning tool that can help establish regulatory certainty and a level playing field,” said Paula DiPerna, special advisor to CDP North America.

Roche, Swiss pharmaceutical maker, Chipotle Mexican Grill, US burrito chain and US home builder Lennar are among 73 laggards who provide inadequate information on the three environmental topics highlighted by the CDP.

Requests for improved disclosure have also been made to 122 Chinese companies, including e-commerce group Alibaba, Kweichow Moutai, the distiller, and Meituan Dianping, China’s largest food delivery app.

Environmental disclosure standards show signs of improvement under pressure from large investors. The campaign coordinated by CDP last year led to 206 companies responding to investor disclosure requests, up from 97 in 2019.

But the financial sector needs to do more to help meet the goal of net zero carbon economy with less than half of banks, asset managers and insurers taking action to ensure their investment portfolios are aligned with the limits of rising global temperatures, according to the CDP.

Amundi, Aviva, Cathay Financial, HSBC Global Asset Management, Legal & General, Nuveen and Schroders have pledged to support the CDP campaign.

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